Chartered Financial Planners in Beverley advise parents to pay their child benefit into a pension in order to keep it.
Pensions adviser, Paul Hegarty from Gecko Wealth in Beverley explains:
“George Osborne got into hot water when he announced that higher rate taxpayers would lose child benefit. The arguments for and against the changes have been well aired and the recent budget saw the Chancellor both stick to his guns and change his mind. This leaves much confusion for parents who are now not sure whether or not their child benefit will continue.”
“There is however a compromise available which means that from January next year those earning between £50,000 to £60,000 will pay extra tax. Child benefit will continue to be paid but an additional tax will be payable via self-assessment. This may come as a shock for those that think they have been overlooked by the taxman only to have to pay up to £2,449, based on a family with three children.”
“To illustrate this example Parents with three children and joint earnings of £53,000 per annum. Will in 2013/2014 pay an extra £734 in tax.
However, instead of paying the tax the highest earner in the home can save £2,400 into a pension. This is grossed up to £3,000 which is deducted from the income leaving no tax to pay.”
“In addition there is a claim of an extra £600 tax relief as a higher rate tax payer. This means the £3,000 invested in the pension has only cost £1,800 plus, they have not had to pay tax of £734 giving an effective rate of tax relief of 64.49%.”
Gecko Wealth advise parents to set this up as soon as possible to ensure they receive their full entitlement.
Please call Gecko Wealth on 01482 678519.
